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Kothari Petrochemicals Ltd.

BSE: 532096 Sector: Industrials
NSE: KOTHARIPET ISIN Code: INE720A01015
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Kothari Petrochemicals Ltd. (KOTHARIPET) - Director Report

Company director report

To the Members

The Directors have pleasure in presenting before you the 31st Annual Reportof the Company together with the Audited Financial Statements for the year ended 31stMarch 2020.

Financial Summary of the Company (Rs in Lakhs)

Sl. No. Particulars 2019 - 2020 2018 - 2019
(i) Total Turnover 27243.08 29901.24
(ii) Profit/(Loss) before Interest and Depreciation 3193.03 2356.03
(iii) Interest 204.27 307.05
(iv) Depreciation 553.92 453.33
(v) Profit / (Loss) BeforeTax 2434.84 1595.65
(vi) Tax Adjustments including Deferred Tax 601.94 377.09
(vii) Profit / (Loss) after Tax 1832.91 1218.57
(viii) Other comprehensive income 0.14 (1.16)
(ix) Total comprehensive income 1833.05 1217.41
(x) Profit brought forward from previous year 2624.07 1943.87

Financials Highlights

The Company's Profit before Tax for the year ended 31st

March 2020 has increased to Rs 2434.84 lakhs as compared to Rs 1595.65 lakhs in theprevious year. The total turnover for the year ended 31st March 2020 is Rs27243.08 lakhs as against Rs 29901.24 lakhs in the previous year. The decrease in turnoveris mainly due to lower LPG Sales by Rs 5299.10 lakhs. However there is increase in PolyIso Butylene (PIB) Sales by Rs 2698.65 lakhs from Rs 20533.49 lakhs to

Rs 23232.14 lakhs.

Status of the Plant

The plant production capacity remains at 24000 TPA of Poly Iso Butylene (PIB) and anapplication has been submitted to get consent for enhancing - 9001:2015 for QualityManagementthe production to 36000 TPA. Generally the plant is in good health to producevarious grades of Poly Iso Butylene as per market demand.

The Company continues to enjoy the benefit of getting the low-cost raw material fromthe investment made in enriching the Lean PBFS (cracked LPG). The Company after a longdiscussion with one of its raw material suppliers has switched over to a high pure feedstock instead of low pure feed stock from their cracker. This has helped the Companyachieve greater operating efficiencies and improvements which has resulted in a bettercontribution to the bottom line.

At present the Captive Power Plant boiler is being operated with the Pollution ControlBoard's (PCB's) consent to use

85% husk and 15% coal as fuel. To have the flexibility switch between 100% husk and100% coal based on the availability and cost your Company has taken steps to get thePCB's consent to operate with 100% coal also.

The newly commissioned Effluent Water Recycle plant is very supportive for the plant tomeet almost 50% of raw water requirement apart from meeting the stringent PCB's effluentdischarge norms. In addition to this effort the company also entered into an agreementwith Chennai Metro Water Board to get their Tertiary Treated RO water which is areplacement of a costlier water supplied by the same Metro water Board.

The solar plant continues to generate power which is consumed by the main plant alongwith Captive powerplants generation.

Your Company continues to get the following ISO system certification

14001:2015 for Environmental Management system and are taking efforts to get ISO45001:2018 for Occupational Health and Safety Management System.

All statutory requirements with regard to Petroleum and Explosives Safety Organisation(PESO) and The Directorate of Industrial Safety and Health (DISH) are being met on time.

All preventive and predictive maintenance are being other operating followedsystematically to keep the overall plant healthiness good.

Performance

For the Seventh year in succession your Company has achieved "Accident Free"operation. The Company has to been continuously imparting training to all its employees toensure that all project execution apart from the plant operation is"accidentfree" and efficient.

Your Company achieved a record production of 23906 MT (Previous Year - 19755 MT)which translates to a capacity utilisation of more than 98% (basis of Kvis 10 operation)in terms of 950 Molecular Weight Poly Iso Butylene.

Various Mass Flow meters were installed in all product loading bays to ensure thatcorrect quantity is loaded in the tankers and minimise the manpower for such activities.This also helps to get more accuracy in the stock reconciliation.

The efforts taken to develop new applications showing encouraging results and our newproduct has been positioned in the market to win the mindsets of the customers and furthertrials are being taking place at various new customers.

Plant automation

As the 1st phase of plant automation strategy Your Company has investedsignificantamount in "Auto Processing Control"

(APC) system which has started giving the desired result.

Lot of control valves were replaced with correct specification to suit the currentlevel of production and brought their operation in Auto mode. This helped the plantoperation with added safety and smooth controls.

Safety

General Safety Audit has been conducted during 2018-2019. All the recommendations havebeen implemented and there are no unsafe conditions identified in the

Process Safety Management

A Process Safety Management (PSM) is being studied to implement in your Company duringthe next financial year

Pollution and Environment compliances

The Central Pollution Control Board has introduced "Online" monitoring andchecking for the Air and Effluent parameters.

Your company has created all necessary facilities as per Pollution Control Board'sdirection and submitted the records and confirming the statutory requirements respect toPollution norms. Your company along with other member units of Manali Industrial Areatook efforts to consolidate and present the fact and figures to PCB the CEPI index whichthe NGT wanted the PCB to submit.

Research and Development

Various researches are being continued in the R&D facility to improve the IBconversion percentage in the existing plant to improve the productivity.

Conservation of Energy / Technology Absorption / Foreign Exchange Earning and Outgo:

(a) Conservation of Energy

Energy Audit was completed in February 2019 and all suggestion were reviewed andimplemented during 2019-2020.

(b) Technology absorption: Nil

(c) Foreign exchange earnings and Outgo:

(Rs in Lakhs)

Sl.
Particulars No. 2019-20 2018-19
(i) Total Foreign Exchange earned 4395.12 3704.82
(ii) Total Foreign Exchange outflow 61.33 104.66

Dividend

The Board of Directors met on 16th June 2020 to take account of the fullyear performance various growth opportunities and the ongoing pandemic. After reviewingthis the Board of Directors has decided not to recommend any dividend for the year2019-2020 given the projects that have been lined up and the forward expansion plans.

Board Meetings

During the year 04 Board Meetings and 04 Audit Committee Meetings were held thedetails of which are given in the Corporate Governance Report. The intervening gap betweentwo meetings was within the period as prescribed under the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.

Share Capital Audit.

The paid-up share capital as on March 31 2020 was Rs 5884.64 Lakhs. The company hasnot issued any shares with differential voting rights nor granted stock options or sweatequity.

Directors and Key Managerial Personnel

Mr. Arjun B. Kothari (DIN: 07117816) was appointed as Managing Director on 08th April2015 and the Board has re-appointed him for a further period of five years with effectfrom 01st April 2020 subject to approval of shareholders in this Annual GeneralMeeting with the remuneration as set out in the Notice of the Company.

Mr. V.V. SuryaRau (DIN: 00010274) was appointed as an Independent Director with effectfrom 20th May 2019. Mr. A. Thanikainathan Company Secretary of the Companyresigned with effect from August 09 2019 and Ms. Deepa Bansal was appointed as theCompany Secretary and Compliance Officer of the Company with effect from August 10 2019.

Mr. Arjun B. Kothari Managing Director Mr. M.Rajavel Whole Time Director Mr.S.Sivamahesh Chief Financial

Officer and Ms. Deepa Bansal Company Secretary are the

Key Managerial Personnel of the Company as per section 203 of the Companies Act 2013.

Declaration from Independent Directors

The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 and Regulation 16 of the SEBI(LODR) Regulations 2015 that the Independent Directors of the Company meet the criteriaof their Independence laid down in Section 149(6) including the confirmations that theirnames have been included

Data Bank maintained by the Indian Institute of Corporate Affairs.

During the year under review the Independent Directors met on February 12 2020without the presence of Non- Independent Directors and members of the Management.

Composition of Audit Committee

The details of composition of Audit Committee is provided in Corporate GovernanceReport of this Annual Report. The Board has not rejected any proposal / recommendations ofAudit Committee during the year.

Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Key Managerial Personnel andSenior Management and their remuneration. The salient features of the Remuneration Policydetails are stated in the Corporate Governance Report. The Remuneration Policy approved bythe Board of Directors is posted on the website of the Companywww.kotharipetrochemicals.com

Vigil Mechanism year

The Company has a vigil mechanism named "Whistle Blower Policy" to deal withgenuine concerns raised by the Directors / Employees if any. The details of the WhistleBlower policy is explained in the Corporate Governance Report and also posted on theCompany's website www.kotharipetrochemicals.com

Particulars of Loans Guarantees or Investments

The Company has not given any Loans or Guarantees covered under the provisions ofsection 186 of the Companies Act 2013. The details of investments made by the company aregiven in the notes to the financial statements.

Related Party Transactions

All related party transactions entered into during the financial year were on an arm'slength basis and were in the ordinary course of business and there were no ‘material'contracts or arrangement or transactions not at arm's length basis and thus disclosure inform AOC-2 is not required.

All Related Party Transactions are placed before the Audit Committee and the Board forapproval. Prior omnibus approval of the Audit Committee is obtained for the transactionswhich are foreseen and repetitive in nature. For all the transactions entered pursuant tothe omnibus approval so granted a statement giving details of all such transactions isplaced before the Audit Committee for their approvals on a quarterly basis. The policy onRelated Party Transactions as approved by the Board is posted on the Company's website inwww.kotharipetrochemicals.com the

Prevention of Insider Trading

The Company has adopted a Code of Prevention of Insider Trading with a view to regulatetrading in securities by the Directors and Designated Persons of the Company. The Coderequires pre-clearance for dealing in the Company's shares and prohibits the purchase orsale of Company shares by the Directors and the designated persons while in possession ofunpublished price sensitive information in relation to the Company and during the periodwhen the Trading Window is closed.

Directors' Responsibility Statement

In terms of Section 134(5) of the Companies Act 2013 the Directors state that: (a) inthe preparation of the annual accounts the applicable accounting standards had beenfollowed along with proper explanation relating to material departures; (b) the directorshad selected such accounting policies and applied them consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the and of the company at the end of the financial profit and loss of thecompany for that period; (c) the directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the company and for preventing and detecting fraud andother irregularities; (d) the directors had prepared the annual accounts on a goingconcern basis; and

(e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Extract of Annual Return

As required pursuant to Section 92(3) of the Companies Act 2013 and Rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of Annual Return in MGT- 9 is attached as a part of this Annual Report.

AUDITORS

a) Statutory Auditor

The Statutory Auditors of the Company M/s. P. Chandrasekar LLP Chartered Accountants

(Registration No. 000580S / S200066) hold office the conclusion of the 33rd AnnualGeneral Meeting of the Company.

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Auditors have confirmed that they hold a valid certificate issued by the PeerReview Board of

Institute of Chartered Accountants of India.

b) Cost Auditor

Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Amendment Rules 2014 the Cost Audit Records maintained by the Companyin respect of its Poly Iso Butylene (PIB) unit require to be audited. Your Directors onthe recommendation of the Audit Committee appointed M/s. P. RajuIyer M. Pandurangan& Associates Cost Accountants in practice for conducting the audit of cost records ofthe Company and the remuneration payable to the Cost Auditor is required to be placedbefore the Members in a general meeting for their ratification. Accordingly a Resolutionseeking Member's ratification for the remuneration payable to M/s. P. RajuIyer M.Pandurangan & Associates Cost Accountant is included at Item No. 3 of the Noticeconvening this Annual General Meeting.

c) Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mrs. V. Vasumathy V. Vasumathy and Associates Company Secretary in PracticeChennai as Secretarial Auditor of the Company. The Secretarial Audit Report is formingpart of this Annual Report and does not contain any qualification or observations.

Deposits

The Company has not accepted deposits either from members or public falling within theambit of Chapter V of the Companies Act 2013 and The Companies (Acceptance of Deposits)Rules 2014 during the year. There were no outstanding deposits during and end of thefinancial 2019 - 2020.

Significant & Material orders passed by the regulators

There are no significant material orders passed by the Regulators / Courts which wouldimpact the going concern status of the company and its future operations.

Internal Control Systems and their Adequacy

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations.

The Internal Audit function is carried out by independent firm of CharteredAccountants. The scope and authority of the

Internal Audit is defined by the Audit Committee. The Internal

Audit Reports are placed before the Audit Committee for its review and the InternalAuditor attend the Audit Committee meetings.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internalcontrol system in the Company its compliance with operating systems accountingprocedures of the Company based on the report of internal auditor the Company undertakescorrective action in their respective areas and thereby strengthens the controls.

Risk Management

Pursuant to the requirement of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Company has laid down the procedures to inform Board Members aboutthe risk assessment and minimization procedures. Accordingly the Company periodicallysubmits the Risk Management Report to the Board for their review and suggestions.

Corporate Social Responsibility Policy

Pursuant to the provisions of Section 135 and schedule VII of the Companies Act 2013Corporate Social Responsibility Committee (CSR) was formed to recommend (a) the policy onCorporate Social Responsibility (CSR) and (b) implementation of the CSR Projects orPrograms to be undertaken by the Company as per CSR Policy for consideration and approvalby the Board of Directors. The policy on Corporate Social Responsibility as approved bythe Board is posted on the Company's website www.kotharipetrochemicals.com

As part of its initiatives under "Corporate Social Responsibility" (CSR) thecompany has contributed funds for the schemes of promotion of education. The contributionsin this regard have been made to the Registered Trust which is undertaking the schemes.Detailed report on CSR activities in the prescribed format is forming part of this AnnualReport.

Annual Performance Evaluation

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board has carried out the AnnualPerformance Evaluation of the Board its Committees and of the individual Directorsin theformat (questionnaire) prescribed by the Nomination and Remuneration Committee of theCompany.

The structured questionnaire covers various aspects of the Board's functioning such asadequacy of the composition of the Board and its Committees Board culture executionandperformance of specific duties obligations and governance.

The performance evaluation of the Directors (without participation of the relevantDirector) was carried out by the entire Board. The Directors expressed their satisfactionwiththe evaluation process.

Separate Meeting of Independent Directors

The Independent Directors of the Company had met during the year to review theperformance of Non-Independent Directors and the Board as a whole reviewed theperformance of the Chairperson of the Company and also assessed the quality quantity andtimeliness of flow of information between the Company Management and the Board without thepresence of the Non-Independent Directors and members of the Management.

Disclosure about Cost Audit
Filing of Cost Audit Report 2019 - 2020 2018 - 2019
Due Date 27.09.2020 27.09.2019
Actual Date 30.08.2020 (Tentatively) 29.08.2019
M/s. P. RajuIyer M/s. P. RajuIyer
Cost Auditor Details M. Pandurangan & Associates M. Pandurangan & Associates
M.No. 27969 Chennai. M.No. 27969 Chennai.
Audit Qualification in Report Nil Nil

Listing with Stock Exchanges

The Company is listed in The National Stock Exchange of India Limited (NSE) and theStock Code is KOTHARIPET and ISIN: INE720A01015. The Company confirms that has paid theAnnual Listing Fees for the year 2020 - 2021 to NSE where the Company's shares are listed.

Corporate Governance and Shareholders Information

Your Company has taken adequate steps to adhere to all the stipulations laid down inSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. A report onCorporate Governance forms part of this Annual Report. All applicable SecretarialStandards have been complied.

Certificate from the Practising Company Secretary confirming the compliance with theconditions of Corporate

Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is attached to this report.

Management Discussion and Analysis Report

A detailed discussion on the industry structure as well as on the financial andoperational performance is contained in the ‘Management Discussion and AnalysisReport' that forms an integral part of this Report.

Particulars of Employees

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5 of the Company (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided elsewhere in the AnnualReport.

PARTICULARS PURSUANT TO SECTION 197(12) AND THE RELEVANT RULES

a) The ratio of the remuneration of each director to the median employee's remunerationfor the financial year and such other details: Except Mr. Arjun B. Kothari ManagingDirector and Mr. M. Rajavel Whole Time Director of the Company no director was inreceipt of remuneration except sitting fees.

Sl. No. Name Designation Ratio
(i) Mr. Arjun. B. Kothari Managing Director 6.74:1
(ii) Mr. M. Rajavel Whole Time Director 9.14:1

b) The percentage increase in remuneration of each Director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year:

Sl. No. Name Designation Percentage of Increase
(i) Mr. Arjun. B. Kothari Managing Director No increase
(ii) Mr. M. Rajavel Whole Time Director 12%
(iii) Mr. A. Thanikainathan(*) Company Secretary 12%
(iv) Mr. S. Sivamahesh(**) Chief Financial Officer -
(v) Ms. Deepa Bansal (***) Company Secretary -

*Mr. A. Thanikainathan has resigned with effect from 09th August 2019.

**Mr. S. Sivamahesh was appointed as Chief Financial

Officer of the Company with effect fromth12 February 2019. ***Ms. DeepaBansal was appointed as Company secretary and Compliance Officer of the Company witheffect from

10th August 2019.

c) 12.60 % increase was reported in the median remuneration of employees in thefinancial year 2019 - 2020.

d) The number of permanent employees on the rolls of company as on 31st Mar2020: 136.

e) Average percentile increase already made in the salaries of employee's other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justificationthereof and any exceptionalcircumstances for increase in the managerial remuneration:

Increase of remuneration for employees varies between 8% to 25% and for KMP theincrease in remuneration was 12% during the year.

f) We affirm that the remuneration paid during the period under review is as per theRemuneration Policy of the company.

Cautionary Statement

Statements in this Report particularly those which relate to Management Discussion andAnalysis as describing the Company's objectives projections estimates and expectationsmay constitute ‘forward looking statements' within the meaning of applicable laws andregulations. Actual results might differ from those either expressed or implied in thestatement depending on the circumstances.

Acknowledgement

Your Directors thank the Banks Customers Financial Institutions GovernmentAuthorities Suppliers and Shareholders for their continued support. Your directors alsoplace on record their appreciation for the services by the employees of the Company.

On behalf of the Board
for Kothari Petrochemicals Limited
Place : Chennai Nina B. Kothari
Date : June 16 2020 Chairperson